|
Article Excerpt
IN BRIEF
Editor's Choice
*** An accident at the Sayano-Shushenskaya hydroelectric plant in the internal republic of Khakasia, Russia's largest HPP, left 17 people dead this week and dozens are still missing. Electricity supplies to the Siberian region, including to United Company RUSAL's Sayanogorsk and Khakas smelters, which between them approximately 70% consumption of electricity produced at the dam. Although the accident is not expected to cause a power deficit for the Krasnoyarsk Territory and smelters in the region had power supplies restored in full shortly after the clear-up began, RUSAL could cut aluminum output in order to create an energy reserve ahead of the winter season in view of the accident. Damages to the plant have been assessed at tens of billions of rubles, and reconstruction will be measured in years rather than months. The accident will likely speed the creation of the Boguchanskaya Hydroelectric Power Plant in order to partially compensate for the decline in power supplies resulting from the accident and RUSAL will work with federal hydrogenerating company RusHydro to restore the energy balance in the region.
*** Alrosa closed 2008 with net losses of 32.598 billion rubles to International Financial Reporting Standards (IFRS) due to the crisis and exchange rate fluctuations, the Russian diamond monopoly said in an earnings report this week. The company's net debt almost doubled due to the need to build deep mines at its diamond pipes. The short-term outlook as the world's biggest economies and diamond consuming nations gradually pull out of crisis might not be spectacular, but it will be sustainable, experts said. Alrosa told Interfax that it had stopped building this debt up and started to repay it in July. One way of repaying the banks might be to sell diamonds to the state and Gokhran could be prepared to buy $3 billion in rough diamonds over two years. Alrosa also has the opportunity to ease its debt by selling off non-core assets, and has agreed to sell its hydrocarbon assets to VTB for $620 million.
*** Russia's Evraz Group said this week that it is still unable to obtain clearance from the Chinese anti-monopoly authorities to increase its stake in China's Delong Holdings Limited to 51% meaning a call and put option attached to the agreement have lapsed and cease to have any further effect. The Russian steel and mining giant has also pulled out of the $400-million Cape Lambert iron ore project in Australia, which, according to earlier plans, was to have been sold to a Evraz-led joint venture with China Metallurgical Group Corporation (MCC). Cape Lambert said in a regulatory filing for the stock exchange that Evraz had sold 60 million shares in the project to a number of Australian and British investors.
*** VSMPO-Avisma this week said will not now round its investment program off until 2014 - two years after it was originally due for completion. The world's biggest titanium producer has yet to approve a final version of the program, but said the crisis had adversely affected many of its customers and some projects have been mothballed or postponed, notably concerning the A-380 and Boeing-787. VSMPO is nevertheless being guided by analysts' forecasts indicating that the economic decline will bottom out before the end of the year and demand for titanium products will then increase and its main strategic goals are to increase milled titanium product output while supplying key branches of Russian industry with enough titanium alloys for their needs. VSMPO also said it aims to boost titanium sponge output 20% to 44,000 tonnes by 2014.
*** The board of directors at Polymetal, Russia's biggest silver producer and a major gold producer, this week said that it values Rudnik Kvartsevy, the silver miner that it is using its own shares to acquire, at 2.78 billion rubles. The company is placing up to 10 million new shares in exchange for 100% of the miner, which holds the licenses for the Sopka Kvartsevaya and Dalniy gold-silver deposits. Since the start of the year, Polymetal has announced several asset purchases for which company stock could be used as payment, such as the purchase of Ayax from Ovoca Gold and it has also reached agreement on acquiring the Sopka Kvartsevaya gold-silver deposit from Lev Levaev's group of companies for 10 million ordinary shares.
*** Polyus Gold, Russia's leading gold producer, has finalized an offer for the buyout of Kazakh peer KazakhGold shareholders and plans to pay for the shares by August 27, the company said this week. The partial offer is now closed and is unconditional in all respects. The overall number of shares bought out by Polyus will not exceed 50.1%. Meanwhile, Polyus got four representatives elected to the board of directors at KazakhGold,.
*** Alisher Usmanov's Metalloinvest this week said it expects its operating profit to rise in August-September. Despite the market hardships of the first half, it said that core activities related to the production and sale of iron ore and steel were still profitable and it expects a positive trend from July to be sustained. Metalloinvest posted operating profit, which enabled it meet its commitments to creditors on time and prevent any overdue loans. The company is also using a VTB loan to refinance the estimated $1.9 billion that it owes Sberbank.
*** Fitch Ratings expects the CIS steel sector to show a slow rebound in 2010, the ratings agency said this week. It said six key industry drivers are likely to influence its ratings for steel producers, namely the split of export and domestic sales, capacity utilization, changes in product mix, the efficiency of non-CIS operations, the level and speed of deleveraging and exchange rate impacts.
TOP STORIES
HPP accident could see RUSAL's Boguchanskaya project accelerated
MOSCOW/ABAKAN. (Interfax) - An accident at the Sayano-Shushenskaya hydroelectric plant in the internal republic of Khakasia, Russia's largest HPP, killed 17 people on August 17 and dozens are still missing. Electricity supplies to the Siberian region, including to United Company RUSAL's Sayanogorsk and Khakas smelters, which between them approximately 70% consumption of electricity produced at the dam.
Although the accident is not expected to cause a power deficit for the Krasnoyarsk Territory and smelters in the region had power supplies restored in full shortly after the clear-up began, RUSAL could cut aluminum output in order to create an energy reserve ahead of the winter season in view of the accident.
Damages to the plant have been assessed at tens of billions of rubles, and reconstruction will be measured in years rather than months. The accident will likely speed the creation of the Boguchanskaya Hydroelectric Power Plant in order to partially compensate for the decline in power supplies resulting from the accident and RUSAL will work with federal hydrogenerating company RusHydro to restore the energy balance in the region.
Boguchany could benefit
The accident at Sayano-Shushenskaya ought to speed the new Boguchany HPP project up, acting RusHydro head Anatoly Zubakin said.
"The lengthy process of restoring the Sayano-Shushenskaya plant's equipment puts accelerating the Boguchany project very high on the agenda. We'll be putting this to our partners and the Energy Ministry," Zubakin said.
RUSAL and RusHydro plan to accelerate the opening of the Boguchanskaya Hydroelectric Power Plant to partially compensate for the decline in power supplies resulting from the accident, UC RUSAL said in a statement issued August 19.
UC RUSAL CEO Oleg Deripaska said "given the current situation with energy supplies to Siberia, we, along with RusHydro, will make every effort to accelerate the opening of the Boguchanskaya HPP, which will partially restore the energy balance that was disrupted as a result of the accident at the Sayano-Shushenskaya HPP and its shutting down.
"For its part, UC RUSAL has done all it could to minimize the consequences of the stoppage at the Sayano-Shushenskaya HPP. A plan for energy supplies was made along with energy producers in Siberia in the shortest time. We understand that eliminating the aftermath of the accident will take four to five years with rather difficult work during moments of peak capacity. For UC RUSAL, the decisions that energy producers make in the near future to organize uninterrupted supplies to our plants are undoubtedly important so that we have the opportunity to react swiftly and flexibly to the situation," Deripaska said.
Both companies told Interfax that no final decision has been made on speeding up the construction of Boguchanskaya Hydroelectric Power Plant.
"The issue of speeding up the completion of the HPP is still at the discussion stage. It is too soon to talk about any decisions," RUSAL said.
However, within two days RusHydro plans to decide on the time and means for speeding up the facility's construction.
"We are in negotiations with our partner [RUSAL] on issues such as simplifying the plan for the project's management, increasing the number of personnel and financing," the head of RusHydro's Siberian division, Dmitry Shervarli, who also oversees the construction of Boguchanskaya Hydroelectric Power Plant, told Interfax.
It was reported earlier that UC RUSAL's losses from the accident could reach 500,000 tonnes of aluminum per year.
UC RUSAL's Sayanogorsk, Khakas, Krasnoyarsk and Novokuznetsk smelters receive their electricity from the Sayano-Shushenskaya HPP.
Seven large transformers for the Boguchanskaya Hydroelectric Power Plant have been delivered to the Krasnoyarsk river port, United Company RUSAL, which is building the plant jointly with hydrogenerating company RusHydro, said in a statement on August 19.
The transformers were prepared and shipped by the Zaporizhia Transformer Plant in accordance with a long-term contract RusHydro and UC RUSAL signed in 2008 on the supply of power transformers. Under the terms of the contract, the delivery of the remaining eight transformers to the plant is to be completed in 2011.
In addition to the transformers, power engineering equipment giant Power Machines delivered three working rotor wheels for hydro turbines being built at the plant to the Krasnoyarsk port. Power Machines will continue to fulfill large orders for the Boguchanskaya plant as part of a long-term contract, the company said.
Under the terms of the contract, the company will handle the drafting, preparation and delivery of nine hydro turbines and nine hydro generators with capacity of 333 megawatts each to the plant. Power Machines plants are currently constructing the fifth hydro turbine as well as the fourth and fifth hydro generators.
The Boguchany Energy & Metallurgical Association (BEMO) project to build the Boguchany hydro-electric dam and aluminum smelter in the Krasnoyarsk territory is being carried out jointly by RUSAL and RusHydro. It calls for the construction of the 3,000-MW Boguchany HPP and the 600,000-tpy Boguchany Aluminum Smelter that will be the power plant's main customer. The first phases of the hydro plant and smelter were initially scheduled to come on line in 2010, and are due to achieve design capacity in 2012, but financial problems at RUSAL may push these dates back.
Smelters unaffected, for now
Aluminum plants run by RUSAL's smelters were not affected by the accident. "They quickly received electricity from other regions," RUSAL spokeswoman Vera Kurochkina told Interfax on August 17.
The power plant supplies electricity to RUSAL's Sayan and Khakas smelters in the immediate vicinity and to the Krasnoyarsk and Novokuznetsk smelters slightly further away.
A source with knowledge of the situation at the smelters said the voltage at the Khakas and Sayan smelters was maintained and that it fell at the Krasnoyarsk and Novokuznetsk smelters after electricity from the Krasnoyarsk and Mainskaya hydroelectric dams was diverted to the Khakasia-based plants, however the smelters are operating as normal.
However, RUSAL could cut aluminum output in order to create an energy reserve ahead of the winter season in view of the accident at the HPP, the world's biggest aluminum and alumina producer said.
RUSAL said Deripaska had taken part in a meeting held by Shmatko and attended by Shoigu and Chairman of the Board of Directors of RusHydro Vyacheslav Sinyugin held to discuss the accident and its consequences for the energy supply in the Siberian region, where several energy-intensive facilities, including RUSAL's aluminum smelters, are located. Meeting participants discussed different scenarios of using backup capacities for uninterrupted supply of energy to RUSAL's facilities.
One of the issues discussed was a possibility to reduce the output at RUSAL's smelters to create additional reserve of energy required for the stable functioning of the region on the eve of the autumn-winter season when the load on the energy system increases.
Ferroalloy maker Kuznetsk Ferroalloys said it was unaffected by the Sayano-Shushenskaya accident.
Power supply to the Evraz Group's Novokuznetsk and West Siberian steel mills and to a number of coal mines in the Kuznetsk basin (Kuzbass), some of them run by Kuzbassrazrezugol Coal Company, or KRU, has been "temporarily restricted," Kuzbassenergo-RES, a branch of the Siberia Inter-regional Grid Distribution Company, said in a press release.
By 19:00 Moscow time Evraz Group had entirely restored supply of power to its Kuzbass-based enterprises following the accident.
Evraz told Interfax that the situation with electricity supply in the Kemerovo region was still tense, but that it was "making every effort to get by with minimal if any production losses."
The accident will not cause a power deficit for the Krasnoyarsk Territory, the region's governor Alexander Khloponin said on August 18, following a visit to the station's site.
"Only the Krasnoyarsk Aluminum Plant has experienced minor problems with its energy needs but a deficit [in electricity] was avoided through the region's existing power capacity," the governor's office told Interfax.
TOP STORIES
Alrosa posts 2008 losses due to crisis, exchange rate
MOSCOW. (Interfax) - Alrosa closed 2008 with net losses of 32.598 billion rubles to International Financial Reporting Standards (IFRS) due to the crisis and exchange rate fluctuations, the Russian diamond monopoly said in an earnings report, seen by Interfax.
Alrosa had net profit of 15.981 billion rubles in 2008.
The company's net debt almost doubled, to 115.545 billion rubles in 2008 from 59.861 billion rubles in 2007, due to the need to build deep mines at its diamond pipes,.
It closed the first quarter of 2009 with net losses of 13 billion rubles to Russian Accounting Standards (RAS).
The short-term outlook for the company's performance as the world's biggest economies and diamond consuming nations gradually pull out of crisis might not be spectacular, but it will be sustainable, experts say.
Losses
Alrosa said in the earnings report that its losses could be attributed to a drop in the fair value of FX forwards, negative exchange rate differences on dollar-denominated loans and provisions for anticipated payments in the forward contracts.
Alrosa signed forward the contracts with banks at the beginning of 2006 to hedge its FX risks as the ruble strengthened. The company agreed to sell US dollars for rubles over a period of five years at between 26.56 rubles and 26.84 rubles to the dollar. Losses arising from changes in the fair value of these contracts (essentially the size of the provisions) came to 25.077 billion rubles in 2008.
"Alrosa's 2008 results were negative, as expected. Growth in the cost of funding and the revaluation of FX contracts worsened the results," Albert Sagirian, JP Morgan's vice president for relations with corporate clients in Russia, told Interfax.
Alrosa's operating loss was 14.097 billion rubles last year, compared with operating profit of 24.43 billion rubles in 2007. The company had negative EBITDA of 5.2 billion rubles, compared to positive 33.041 billion rubles in 2007.
But sales revenue was still sustained, even though Alrosa hardly sold any diamonds on the market after November. Revenue was 91.082 billion rubles last year, up slightly from 90.734 billion rubles in 2007.
Diamond sales accounted for 86% of overall revenue, or 78.244 billion rubles, but were 2% down from 2007. Export revenue fell 18% to 38.88 billion rubles, due primarily to a reduction in sales to De Beers. However sales in the domestic market rose 27% to 35.292 billion rubles.
Considerable growth in demand and prices for cut and uncut diamonds were forecast at the beginning of 2008. This was actually the case until September, but the crisis hit the diamond sector in the autumn. Demand plummeted, the market was saturated and loans were hard to come by. Rough diamond prices started to slide and the biggest mining companies said they were cutting sales, and some of them mine production.
Alrosa was only just starting to establish long-term relations with clients at that time, Sergei Goryainov, an expert at Rough&Polished, told Interfax. "Most of its clients were one-off clients, who might have bought large consignments of diamonds and generate profit, but without any guarantee that they would buy in the future. Most of those clients were not interested in steady procurement for cutting purposes - the price had risen and diamonds were being bought for speculative reasons. The economic conditions changed with the crisis, and these one-off clients scattered. Alrosa didn't yet have enough long-term contracts," the expert said.
Despite the drop in earnings, Alrosa managed to stick to its capex program, valued at 18.259 billion rubles. It even increased spending on exploration, to 4.52 billion rubles in 2008 from 4.14 billion rubles in 2007.
Alrosa is converting its open pit mining operations into deep mines, and most of the capex went on these. Alrosa is in the process of building three deep mines, each of them costing approximately $1 billion. The company expects to commission one of the new mines at its famous Mir diamond pipe next week.
Debt
Alrosa borrowed fairly heavily in order to fund the capex, and this is what pushed its net...
|
